by Tridivesh Singh Maini
Chinese deputy foreign minister Zhang Hanhui has spoken about the need for China and Iran to work closely together, so as to minimise the problems caused by the US withdrawal from the Joint Comprehensive Plan of Action (JCPOA): “Our hope is that China and Iran will have close consultation on the basis of observing the deal and push forward development of bilateral cooperation … We should together look into how to avoid major disruption of joint projects between the two sides.”
Iran shares a close economic relationship with China. Trade between both countries was estimated at USD 37 billion for the year 2017. China could benefit indirectly from the US withdrawal from the JCPOA and the imposition of sanctions. For instance, the stake of the China National Petroleum Corporation (CNPC) is likely to increase in the Iranian South Pars gas project if the French company Total SA moves out of Iran. Currently, Total has a 50.1 percent stake, CNPC 30 percent, and Petropars (Iran) 19.9 percent.
Iran, which is suspicious of the US, shares a strong relationship with China. It would be important to point out that Chinese President Xi Jinping was the second international leader to visit Iran after the signing of the JCPOA and the lifting of sanctions. Xi visited Iran in January 2016 (Putin had visited in November 2015), just a few months after the signing of the JCPOA. During Xi’s visit, a number of agreements were signed, with a thrust on energy and trade. Both sides also discussed China’s Belt and Road Initiative (BRI). While addressing a news conference with Xi, Iranian President Hassan Rouhani reiterated the importance of the relationship, saying: “Iran and China have agreed to increase trade to $600 billion in the next 10 years … Iran and China have agreed on forming strategic relations (as) reflected in a 25-year comprehensive document.”
China is likely to extend full support to Iran at the meeting of the Shanghai Cooperation Organisation (SCO) in the second week of June at Qingdao. The Chinese President will be meeting President Rouhani on the sidelines of the SCO to discuss the fallout of the US withdrawal from the JCPOA.
Like China, India too has high stakes in Iran. Apart from investing in Iran’s Chabahar Port, which is India’s gateway to Afghanistan and Central Asia, India has significantly increased its oil imports from Iran. As of March 2018, oil imports from Iran were to the tune of 27 million tons. During Iranian Foreign Minister Javad Zarif’s New Delhi visit and his discussions with the Indian Foreign Minister, one of the issues which came up was the Rupee-Rial trade. It was also decided that it may be feasible for oil payments to be made through entities which have no US exposure, such as the state-run UCO Bank.
While sharing close ties with Iran, New Delhi also needs to keep in mind its relationship with the US, which has witnessed an upswing in recent years. India thus has to walk a tightrope.
Interestingly, Indian Foreign Minister Sushma Swaraj has said: “India follows only UN sanctions, and not unilateral sanctions by any country.”
For India, doing a balancing act between the US and Iran is likely to be a significant challenge. The US so far has given mixed signals with regard to its allies doing business with Iran. It would be useful to understand the US approach to Indian defense acquisitions from Russia in the context of the US’ Countering America’s Adversaries Through Sanctions Act (CAATSA), before looking at how Washington will react to New Delhi’s economic linkages with Iran.
Trump’s Iran policy has created problems for a number of its allies, including India, in the short term. Yet, it has also created a situation where New Delhi, Beijing and Moscow need to think out of the box.
If one were to look at Indian defense acquisitions from Russia, the US has given mixed signals. India’s purchase of S-400 ballistic missile shields from Russia could for instance, jeopardize India’s acquisition of US-built Predator drones if one were to go by the statements of the Chairman of the US House Armed Services Committee, William Thornberry. On one hand, Thornberry has stated: “In the legislation that passed the house just last Thursday, there was additional flexibility in the law for nations that have historical ties and thus Russian equipment … There will be some additional flexibility that will not just be limited to India but there are other countries that fall into that category.” On the other hand, Thornberry has also warned that India’s purchases from Russia “threatens our ability to work interoperably in the future.”
Here it would be pertinent to mention that US Defence Secretary James Mattis along with some other Congressmen has advised US to exhibit flexibility vis-à-vis allies like India and Vietnam when it comes to defense purchases from Russia. At a Senate Armed Services Committee hearing in April 2018, Mattis argued against strict compliance to CAATSA, and pitched for waivers to countries like India and Vietnam: “We only need to look at India, Vietnam and some others to recognize that eventually we’re going to penalize ourselves.”
Iran, however, is a different ball game, and Trump’s National Security Advisor John Bolton has taken a tougher line vis-à-vis countries doing business with Iran. While he has not commented about India, on Europe he has said that it will ultimately veer towards the US: “I think the Europeans will see that’s in their interest ultimately to go along with this.”
While India has so far been guarded in its response to the US withdrawal from JCPOA (batting for a solution, but not really taking an unequivocal stand), one key question is whether there is scope for some sort of understanding between India and China on this issue. In recent years, both countries have found common ground on a number of global issues including climate change, and in recent months, both Beijing and New Delhi have been trying to find common ground over a number of issues, including dealing with US President’s unpredictable economic policies.
On the issue of Iran, there cannot be perfect convergence, since India’s development of Chabahar Port in Iran was India’s response to China’s development of Gwadar Port in Pakistan, an important component of the BRI. That said, stability in Iran is important for China in the context of the BRI, and for India too in the context of its connectivity with Afghanistan and Central Asia. If India and China can explore the possibility of working jointly in Afghanistan, as was discussed during Indian PM Narendra Modi’s China visit, there is no reason why both countries along with Russia may not find ways and means to minimize the disruptions caused by President Trump’s recent decision. Closer cooperation on the Iran issue would also send a firm message to the US that New Delhi will ultimately see its own national interest and regional priorities while maintaining a robust relationship with the US.
Trump’s Iran policy has created problems for a number of its allies, including India, in the short term. Yet, it has also created a situation where New Delhi, Beijing and Moscow need to think out of the box. In recent years, there have been strategic differences between India, Russia, and China. (One reason has been New Delhi’s cosying up to Washington.) Recent events have provided a golden opportunity to re-shape the narrative. China on its part should not restrict consultations on Iran to Russia, but should understand that any discussion on Iran is incomplete without India’s views and inputs, given New Delhi’s economic and strategic interests. A lot will depend upon how the SCO summit pans out.
Tridivesh Singh Maini is a New Delhi-based policy analyst associated with The Jindal School of International Affairs